A timely demand
for binding arbitration of a contractual attorney fee dispute is effective to
invalidate a nonbinding statutory award, without the need to petition the
superior court to compel arbitration, the Court of Appeal for this district
ruled yesterday.

Rosenson and the
Beverly Hills firm entered into a retainer agreement, which included a
provision requiring that all fee disputes be arbitrated before a retired judge,
in 2003. Rosenson paid the firm more than $916,000, but a dispute arose and the
client field for nonbinding arbitration, pursuant to the Mandatory Fee
Arbitration Act, with the Beverly Hills Bar Association.

The arbitrators
found that Rosenson had been overcharged by $75,000, and awarded that sum plus
$5,000 in costs.

Less than 30
days later, however, Greenberg Glusker filed a demand for binding arbitration
with JAMS. Rosenson did not participate in JAMS arbitration, but filed a
petition with the Los Angeles Superior Court to confirm the BHBA award, which
the law firm opposed on the ground that it had timely invoked its right to binding
arbitration.

Trial Court Ruling

Judge Michael
Stern ruled that Greenberg Glusker had not effectively contested the nonbinding
award, and that because the time to do so had expired, the award had become
binding and the client was entitled to judgment in his favor.

But Justice
Sandy Kriegler, writing for the Court of Appeal, said the trial judge had
misinterpreted the MFAA.

“If the parties
have agreed in writing to binding arbitration, a demand for arbitration within
30 days of service of the MFAA award is a proceeding that prevents finality of
the MFAA award,” the justice wrote.

Under Schatz
v. Allen Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557,
an agreement for binding arbitration may be invoked if either party to a
nonbinding MFAA arbitration rejects the award. Because the statute provides
that a dispute in which a nonbinding award has been rejected may proceed to an
“action or other proceeding,” the Schatz court held, the MFAA does not
deprive either party of its contractual right to binding arbitration.

Kriegler
elaborated:

“The reasoning
of Rosenson and the trial court—that an action to compel arbitration in
superior court is the only method of preventing an award under the MFAA from
becoming final—is inconsistent with our Supreme Court’s determination that
binding contractual arbitration is an alternative, acceptable form of dispute
resolution.”

Besides, the
justice wrote, at the time Greenberg Glusker demanded binding arbitration, it
could not petition the court to compel “because Rosenson had not yet refused to
arbitrate.”

‘Quick and Efficient’

Past cases,
Kriegler explained, hold that a petition to compel arbitration is not ripe
unless and until the other party refuses to arbitrate.

“The purpose of
arbitration is to provide a quick and efficient form of alternate dispute
resolution,” he wrote. “Requiring Greenberg Glusker to file a superior court
action to compel arbitration before Rosenson refused to participate is
inconsistent with the goals of arbitration. We decline to interpret the MFAA in
a manner that compels this unreasonable result.”

Attorneys on
appeal were Charles N. Shephard and Rachel Wilkes Barchie of Greenberg Glusker
on behalf of the firm, and Richard P. Petersen on behalf of Rosenson.